Pursuant to a congressional request, GAO evaluated the Internal Revenue
Service's (IRS) records management program, focusing on how IRS: (1)
applies the restrictions of U.S. Code, title 26, section 6103, in
reviewing and inventorying its records; and (2) carries out its records
management responsibilities.

GAO noted that: (1)the National Archives and Records Administration's
(NARA) 1995 review of IRS' records program found that IRS had managed
its overall records program according to NARA requirements, except for
certain issues; (2) NARA found that certain management and policy
documents, many of which IRS maintained were subject to the disclosure
restrictions of section 6103, were not inventoried or scheduled for
disposition as required, and that some documents were stored in
unsatisfactory conditions; (3) NARA's review highlighted issues
associated with its inability to appraise certain IRS records for
historical value because of IRS' interpretation of section 6103
restrictions; (4) GAO's review confirmed that these problems existed,
but identified progress being made by IRS, and confirmed that the
controversy related to NARA's access remains unresolved; (5) certain IRS
management that documented policymaking and high-profile programs and
actions were not reviewed by NARA because IRS maintained that the
documents potentially contained taxpayer-protected data; (6) NARA and
IRS subsequently worked out a test method for appraising some of these
management records; (7) IRS and NARA engaged in a "blind" review of the
6103-protected records, whereby an IRS official described the records'
contents to the NARA records appraiser who decided on the basis of this
description whether the records had historical value; (8) the
nonprotected records were made available to NARA for appraisal; (9) GAO
observed that 59 percent of the records were designated as historical
and containing tax returns or return information, 36 percent were
designated as historical and containing no tax return information, and 5
percent were designated as nonhistorical and could be destroyed after
the applicable period; (10) at the time of NARA's and GAO's reviews, a
substantial backlog of uninventoried records has accumulated at IRS;
(11) in four of the six headquarters storage locations GAO observed in
early 1996 , records were stored in no particular order and under poor
conditions; (12) according to NARA, some of the records stored at IRS
headquarters could have been less expensively stored at a federal
records center; (13) early in 1996, IRS escalated its efforts to improve
its records management program with NARA's assistance; (14) as of May
1997, IRS' last official reporting date, NARA said that IRS had
completed action on 47 of NARA's 58 recommendations to improve records
management and was making progress on the other recommendations; and
(15) the two agencies agreed that less progress had been made on
resolving NARA's access for appraisal purposes.